Siemens, Mitsubishi hatch Alstom plan as French ministers meet

French ministers met on Thursday to discuss the fate of cash-strapped engineering group Alstom as Siemens and Mitsubishi Heavy Industries hatched a plan to beat an offer by U.S. conglomerate General Electric.

The German and Japanese groups said on Wednesday they were discussing a joint offer for Alstom’s energy assets that would compete with GE’s $17 billion proposal and would be worth around $9.8 billion, according to the Nikkei newspaper.

Two sources familiar with the Siemens-Mitsubishi plan said it would not be a direct buyout of Alstom’s power assets but would rather set up one or several joint holdings in power. They added that Siemens was still ready to give Alstom its train business as part of the deal - although the French group has so far not shown much interest in such an asset swap.

Such a plan could, however, address calls from the government to favour partnerships over a straight sale of Alstom’s power arm - 70 percent of group revenue. They fear leaving the company vulnerable once reduced to its smaller transport business.

France has tried hard in recent weeks to drum up better offers for Alstom, which makes power turbines and trains, saying it wanted to preserve the country’s jobs and industrial know-how and even giving itself powers to veto a deal.

Alstom is the maker of France’s iconic TGV high-speed trains and a top supplier of power equipment that is used in 40 percent of the world’s nuclear plants. It employs some 18,000 people in France - around a fifth of its global workforce. It was rescued by the state from near bankruptcy a decade ago and has since strongly relied on public orders for rail and power equipment.

Thursday’s meeting brought together French President Francois Hollande, Economy Minister Arnaud Montebourg and David Azema, the head of French state holding company APE.

Another meeting is scheduled next week, an official at the president’s office said, stressing that the government did not favour one offer over the other at this stage.

“Our demands have never changed. What are our goals? To defend the country’s energy independence, to maintain business and decision-making in France and to obtain the most favourable situation on the jobs front,” the official said.

“It’s against these criteria that we will continue to examine the proposals on the table. As far as our method goes we don’t have a preference for this or that proposal, we have demands.”

Montebourg has been very vocal on the Alstom case and has repeatedly warned against “tearing apart” the group, which he sees as a symbol of France’s engineering prowess. He has openly favoured alliances and partnerships over divestment.

BREAKUP? OR ALLIANCE?

News of Mitsubishi’s partnership with Siemens emerged on Wednesday, and Hitachi, a joint ventures partner with Mitsubishi, said earlier on Thursday it also hoped to take part. The Nikkei report said the two Japanese companies would set up a joint venture to bid for Alstom’s steam turbine operations, said to be valued at 500 billion yen ($4.90 billion).

“The closer we get to the deadlines the more we hear of other groups being involved,” said Didier Lesou, an Alstom union representative from CFE-CGC. “If the Japanese are in too that would imply a breakup of Alstom’s energy business. It’s scary.”

But two sources familiar with the matter, including one close to Siemens, said that was not the spirit of a Siemens-Mitsubishi plan, which would help allay antitrust concerns and would play the card of an alliance as advocated by Montebourg.

“MHI’s plan with Siemens is to leave as much as possible in the hands of Alstom, to maintain a strong Alstom presence in power and to build a partnership involving one or several joint-ventures, notably in turbines,” said the other source, which is close to the French government.

Alstom declined to comment. Siemens, which also declined to comment, has said it plans to unveil a bid by Monday. Its supervisory board will meet on Sunday evening, according to a source close to the group.

GE agreed last month to extend its offer until June 23, at the government’s request.